“We must adopt a moderately expansionary fiscal policy in coping with downward pressures, as we de-leverage the economy step by step while preventing it from nose-diving,” said Lou Jiwei at a press conference during China’s annual parliament session. The Finance Minister said the actual budget deficit would be around 2.7 per cent of GDP this year. China’s finance ministry have earlier asked local governments to re-examine the amount of debt they reported previously as authorities step up efforts to limit leverage and control risks to the financial system. According to data compiled by China’s National Audit Office, local government debt swelled to 17.9 trillion yuan as of June 2013, compared with 10.7 trillion yuan at the end of 2010.

Local governments will repay more than 100 billion yuan ($15.97 billion) in debt this year, Lou said at Friday’s news conference.

“The risk of China’s local government debt is generally controllable,” said Lou.

The Chinese Finance Minister also warned that signs of recovery in the world economy are not obvious enough, including that in the United States, adding that China will be affected by such a “new normal” of the world economy.

The Chinese economy grew 7.4 per cent last year, the lowest pace in 24 years. The government on Thursday lowered its 2015 economic growth target to about 7 per cent.